Some Troubling Data For Apple and SanDisk Shareholders

Some troubling news for Apple (NASDAQ:AAPL) and Sandisk (NASDAQ:SNDK) from market research firm iSuppli this morning:

In an early warning sign of consumer weakness, Apple Inc. has slashed its 2008 NAND order forecast significantly and has informed suppliers that its demand growth will slow in 2008 compared to 2007, according to iSuppli sources. This is expected to have a huge impact on the NAND market.

With its extremely popular flash-memory based iPods, Apple was the world's third largest OEM buyer of NAND flash memory in 2007, with purchases of $1.2 billion, representing 13.1 percent of the global market, according to iSuppli's OEM Semiconductor Spend Analysis tool. Before word of Apple's warning, iSuppli had predicted the company's NAND flash purchases would rise by 32.2 percent this year, helping drive significant market growth.

On the supply side, slower NAND demand will have a major impact on suppliers’ financial results. Capital spending on NAND production will rise by more than 20 percent this year, ensuring easy availability of parts. This will cause prices to decrease. iSuppli believes that NAND prices already are below suppliers’ fully loaded costs.

Notablecalls: Note that most of AAPL's NAND comes from SNDK. Expect to see weakness in both.

NAND weakness most likely stems from iPods. This is not a complete surprise, but the situation looks somewhat more troubling than I previously thought.

Disclosure: No positions

Update: Forget what I said about shorting AAPL/SNDK. Given RIMM's guidance, CSCO upgrade from Citi and GRMN upgrade from Baird, just fugghedaboutit!

Comments

[tessant:]

apple doesnt get ANY of its NAND from SNDK, you might want to research that before you print it

2008 Feb 21 07:24 AM

[Julian Ivan...:]

Dollar value of NAND is dropping, not unit sales. There is no "slashing of demand from Apple. There is a plunging in pries paid for NAND chips, and a glut resulting from Apple not upgrading their flash-based products as quickly as the NAND industry expeted.

This is a NAND overproduction problem, not an Apple demand problem.

2008 Feb 21 07:51 AM

[digivision:]

Assuming the cuts in productions #s are indeed accurate they are of 50% so in perfect line with the normal seasonal slowdown for this post holiday qtr..
in short nothing troubling but in line with previous years.
If you top it with the drop in NAND prices Apple is positioned to make a huge profit even with lower sales numbers

2008 Feb 21 08:30 AM

[Jon T:]

Is 'Notable Calls' for real?

Amateurs.

2008 Feb 21 08:54 AM

[Hayweed:]

Note that it says Apple slowed its demand growth. That could mean that if Apple's NAND order last year grew 40%, and this year forecast 30% growth that would be a slowing of demand growth. The line that Apple slashed its order significantly could be the difference between ramping up for the Christmas quarter and then decreasing the order for the weaker jan-mar quarter. This news is most likely a non event

2008 Feb 21 08:57 AM

[duwa45:]

Does anybody have statistics on Nand growth in cellphones? This surely is a much bigger market than Ipod isnt it?

2008 Feb 21 09:21 AM

[Joe2:]

Shuffle prices were slashed by $30 recently, and capacity was upgraded to 2GB. This means increase in shuffle unit sales, and when coupled with increase in capacity on some of those units, I don't get the iSuppli announcement. It doesn't fit what we all see out there.

What are we missing?

2008 Feb 21 10:19 AM

[Road_geo:]

At least part of Apple's reduced forecast is due to loss of market share (both in iPods and iPhones). It would be nice to know how much. How about blogging on that? BTW, where'd you get that part about Apple flash coming from Sandisk? Reference?

2008 Feb 21 12:43 PM

[Tom B:]

"At least part of Apple's reduced forecast is due to loss of market share (both in iPods and iPhones)."

We're in a recession. Consumer demand may be a bit weak. I strongly doubt percent market share for i-Devices is suffering, though. There's no credible competition. Have you any data to the contrary?

2008 Feb 21 01:23 PM

[artman1033:]

too much fud.......
For the real info go here: www.macobserver.com/fo...

2008 Feb 21 02:01 PM

[dithers:]

time for regulation of the BS that gets spouted about the Stock Market.
Its getting to a point where its criminal.

2008 Feb 21 03:07 PM

[dkhkch:]

Another example of Notable Calls getting it wrong.....

2008 Feb 23 10:57 AM

[TA:]

AAPL lovers - if there's a chance you love your money more than Apple(you never know, there might be a few), you might want to read this excellent free piece from Alan Farley(the smartest contributer to thestreet IMHO) - very sobering for those who love the company

www.thestreet.com/stor...

2008 Feb 24 01:08 AM

[TanToday:]

From the linked article....>>>... a technician and trader, I have little insight about iPod, iPhone or Mac sales going forward. But I can read the charts and see how they're shaping up after the recent plunge. Is now the right time to reload positions for a trip back to the highs? Or should current investors jump ship while they've still have the opportunity to salvage a few profits?"<<<

I believe it is all summed up in his self admission...

"...As a technician and trader, I have little insight about...."

So, we have a chart watcher seeing a chart that has gone down, cause OTHER clueless chartwatchers and anal-ists have WORRIED about this or that, and SPECUALTED on that or this or the other things...

Now what FACTS do we have, to deal with, oh yeah, forgot....

Last quarter sales UP 58% over a year ago, RECORD profits....stores filled with consumers....backliste... wait lists for the better products....

But hey, FORGETTABOUTALLTHAT, you see, it is now all about the FEAR AND FUD.....the what iff'ers, the doom and gloom crowd.

You know, I always suspected that if they would just eliminate the crystal ball prognosticators, and go back to reading bird entrails they would actually INCREASE the credibility of what passes for informed speculation in the financial press.

2008 Feb 27 10:56 AM